Latest news with #ScottLincicome
Washington Post
27-05-2025
- Business
- Washington Post
Republicans can't pay for their tax cuts with fantasy revenue sources
Scott Lincicome is vice president of general economics at the Cato Institute. In the spring of 2025, Washington is again engaged in a favorite bipartisan pastime: magical thinking. Last week, the House of Representatives passed a sprawling tax proposal — affectionately (and cringingly) dubbed the One Big Beautiful Bill — offering trillions in tax relief over the next decade, mainly by extending the 2017 Tax Cuts and Jobs Act. Unlike in 2017, however, there's a twist: White House officials are selling the bill to deficit-wary holdouts in Congress by claiming that President Donald Trump's new tariffs will provide a steady stream of federal revenue to offset much of the OBBB's estimated 10-year cost.
Washington Post
26-05-2025
- Business
- Washington Post
Trump's tariffs won't pay for Congress's ‘big, beautiful' tax cuts
Scott Lincicome is vice president of general economics at the Cato Institute. In the spring of 2025, Washington is again engaged in a favorite bipartisan pastime: magical thinking. Last week, the House of Representatives passed a sprawling tax proposal — affectionately (and cringingly) dubbed the One Big Beautiful Bill — offering trillions in tax relief over the next decade, mainly by extending the 2017 Tax Cuts and Jobs Act. Unlike in 2017, however, there's a twist: White House officials are selling the bill to deficit-wary holdouts in Congress by claiming that President Donald Trump's new tariffs will provide a steady stream of federal revenue to offset much of the OBBB's estimated 10-year cost. It's not happening. And the president's latest threat of a new 25 percent tariff on iPhones and 50percent tariffs on all European goods, which would theoretically fill Treasury's coffers further, helps show why tariffs won't cover the tax bill's cost. First and most obviously, the tariffs are not hardwired into law but instead implemented unilaterally under Section 301 of the Trade Act of 1974, Section 232 of the Trade Expansion Act of 1962, and — most recently and significantly — the International Emergency Economic Powers Act (IEEPA). These statutes arguably give the president broad discretion to impose tariffs, but only while he occupies the Oval Office. When another administration takes power in 2029 — Trump is constitutionally barred from a third term — the next president could unwind these tariffs as quickly as Trump imposed them. Given the public reaction and market turmoil, it's a reasonable expectation, especially if Democrats win the White House. Relying on the revenue before 2029 is also a major risk. As of today, there are seven legal challenges to tariffs that Trump imposed this year under IEEPA, which many legal scholars believe was either not intended for blanket tariffs or is an impermissible delegation of Congress's constitutional authority to regulate trade. Because IEEPA underlies Trump's biggest, broadest tariffs (including his blanket 'Liberation Day' taxes), a single court ruling against them or the law would mean trillions less in revenue. And even if a court refused to enjoin the tariffs while judicial proceedings are ongoing, recent precedent — a 2019 challenge to Trump's Section 232 tariffs on Turkish steel — indicates that a final ruling could come in as little as 18 months. Other threats to the tariffs' revenue generation come from the administration itself. Trump's latest threats against Apple and the E.U. show the speed and unpredictability of U.S. trade policy today, and tariffs can depart just as quickly as they arrive. The market's muted reaction on Friday probably stems from disbelief that he'll follow through with something so economically damaging. New trade deals with Britain and China, in fact, each lowered certain U.S. tariffs and promised additional liberalization in the months ahead as bilateral negotiations continued. The same discussions are also reportedly underway with dozens of other countries, each one likely to include similar or larger tariff reductions and carveouts. Previous Trump trade agreements, such as his 2020 'Phase One' deal with China, also reduced tariffs or exempted entire countries therefrom, and even bigger moves could come if financial markets resume their tariff-related skittishness. If tariffs are a bargaining chip, they can't be counted on for reliable revenue. Then there are product exclusions, which are already widespread and often granted to politically powerful companies. Fentanyl-related tariffs on imports from Canada and Mexico — the United States' two largest trading partners — have been suspended for goods that qualify for the U.S.-Mexico-Canada Agreement. Consumer electronics have so far been exempted from the 'Liberation Day' tariffs — even ones from China. These moves alone cover hundreds of billions of dollars in annual imports into the United States. Trump's first term also brought major tariff carveouts: According to one recent paper, exclusions probably reduced the value of Chinese imports subject to U.S. tariffs by roughly $100 billion between 2018 and 2022. Finally, there are broader forces that will shrink federal revenue even further. The tariffs will reduce economic growth by raising input costs, reducing business investment, disrupting supply chains and prompting foreign retaliation. Many economists, therefore, project that the tariffs' drag will offset any increases in GDP owed to tax cuts. Proponents of Trump's tax bill are fond of touting dynamic scoring — the idea that tax cuts will stimulate economic activity, thereby boosting future government revenue — yet they ignore that Trump's tariffs will have the exact opposite effect. This is assuming the tariffs get paid. High and variable tariffs will also encourage private parties to develop creative ways to reduce or evade these taxes by rearranging their supply chains, exploiting legal loopholes, undervaluing imports, or engaging in illicit transshipment and smuggling. According to a 2004 paper in the Journal of Political Economy, every one‐percentage‐point increase in the tariff rate is associated with a 3 percent increase in evasion — a response so intense, the authors speculate, that 'tax increases may even produce a reduction rather than an increase in tax revenues.' More recently, economists with Goldman-Sachs estimate that similar moves during the 2018-2019 trade war with China reduced U.S. tariff revenue by $15 billion, and they expect even larger losses this time around. Reasonable minds can differ on the direction of future U.S. tax or trade policy. But Congress should pursue both with honesty and pay for its tax plans by closing loopholes and cutting federal spending, not turning to fantasy sources of revenue.
Politico
09-05-2025
- Business
- Politico
Distrust of Trump hangs over the emerging US-UK trade deal
There's a fundamental challenge facing the nascent trade deal the United States and United Kingdom just unveiled: neither country trusts the man behind it. A wide majority of American and British adults support their governments reaching a deal, according to a POLITICO-Public First poll conducted last month, but less than one-third of respondents in the U.K. and 44 percent of Americans said they believed Trump would abide by it. Nearly half of Americans, including 25 percent of his own voters, said Trump's unpredictability is the biggest barrier to negotiations. The poll offers a sobering assessment of how Trump's whiplash-inducing approach to tariffs has eroded the United States' credibility in other countries — a warning for the White House that its combative approach is pushing longtime allies towards its biggest economic rival: China. After all, the U.K. deal is among the easiest to broker of the dozens the Trump administration is scurrying to complete by July 8. The administration announced Thursday an agreement that will lower tariffs on British-made cars, plane parts and steel and aluminum and open up the British market for American agricultural products, ethanol and machinery. But the agreement also dodged some of the thorniest trade issues between the two countries. And it was reached with a partner, the U.K., that has been working on striking a trade deal with the U.S. since the first Trump administration. The POLITICO-Public First poll found that nearly half of Americans agree that the U.K. is the most important country for the United States to have as an ally — but only one in five say it's the most important country to have a good trade deal with. And the specifics of the deal did not bother Americans, who generally supported any deal that did not introduce new tariffs, giving the administration room to maneuver on a deal. But even as Trump takes a victory lap, the poll found serious warning signs about how Trump's approach to tariffs is damaging the U.S. image both at home and abroad. A 42 percent plurality of British adults said that China would be a more reliable trading partner than the United States — with a majority citing Trump's unpredictability as the top pitfall in any deal. That sentiment was particularly strong among young people, raising questions about the country's future standing: A majority of U.K. adults younger than 34 said China is the more stable partner. 'China is looking a lot better these days, given that they're not unilaterally and without provocation lashing out at even folks they thought were their closest allies and trading partners,' said Scott Lincicome, vice president of general economics at the libertarian-leaning Cato Institute. The news that the United States is nearing a deal with the United Kingdom is likely to be welcomed by adults in both countries. A majority of American and British adults surveyed by London-based pollster Public First for POLITICO last month said they support their governments reaching a trade deal and agreed that the bilateral relationship is important not just on economic terms but also for national security. The online poll of about 2,000 adults in each country was conducted from April 23 to 27. While Trump largely spared the U.K. from his harshest tariffs — in large part because the U.S. ran a trade surplus with Britain in 2024 — the British automobile and steel sectors were hit hard by Trump's 25 percent tariffs that went into effect earlier this spring. The U.K. exported $11.8 billion in automobiles to the U.S. in 2024 and the U.S. is Britain's second most important export market for steel. The framework announced Thursday will provide tariff relief for those sectors, but also comes with a guarantee that the U.K. will open its market to billions in U.S. agriculture, ethanol and machinery. 'I think that it's a great deal for both parties,' Trump said. 'It is for us. We've opened up, I didn't know how closed it was, quite closed, the market, the UK. And it opens up a tremendous market for us, and it works out very well.' American adults did not have strong feelings about possible elements of a U.S.-U.K. trade deal. Asked about a variety of options, Americans said they were willing to accept them without strong preferences. But there's deep-seated doubt among Americans about whether Trump would stick to his agreement: 47 percent said Trump's unpredictability is the biggest barrier to negotiations between the U.K. and U.S. and 42 percent said they would not trust Trump to abide by a trade deal, including 11 percent of his own supporters and 36 percent of Independents. The poll also shows the White House has not really sold the American public on his aggressive use of tariffs or broader trade agenda. Just 34 percent of American respondents said they supported Trump's decision to impose duties on other countries. Only 25 percent of independents supported raising tariffs, while 48 percent were opposed. Trump has gone after nearly every country in the world with new tariffs, but has saved some of his sharpest salvos for key allies like the European Union and Canada. The president's brash approach has been coupled with high tariffs on critical manufacturing sectors and a threat of sweeping global tariffs of up to 50 percent on some rising Asian economies that are strategically important to U.S. efforts to cut down China's influence and economic power. While Trump paused his most severe tariffs for 90 days, critics have warned his trade agenda, including his willingness to start and stop tariffs on a whim, will drive those countries toward Beijing, a finding borne out in the new polling. China has engaged in a charm offensive with other countries as it seeks to position itself as a better trading partner as Trump tears up agreement after agreement. Chinese President Xi Jinping visited several Asian countries to discuss economic partnerships shortly after Trump unveiled his sweeping April 2 tariff regime and his government has also made overtures about expanding trade ties with the European Union. While their economic rivalry has intensified, the world's two largest economies are still deeply intertwined, and the ongoing trade war is threatening to do deep damage to the U.S. economy, driving up the price of goods like automobiles, clothes and toys, while risking product disruptions should the tariff wall between the two countries stretch on deeper into the summer. China and the U.S. are set to begin talks this weekend, but Treasury Secretary Scott Bessent has made clear there is still a long, uncertain road ahead. 'I think there is a lot of quite reasonable uncertainty out there,' said Ed Gresser, a former official in the Office of the U.S. Trade Representative now at the Progressive Policy Institute, a left-leaning think tank. 'And that's having its effects.'
Yahoo
23-04-2025
- Business
- Yahoo
Trump's Approval Rating Is Tanking by Every Indicator That Matters
Americans at large disapprove of President Trump's performance on virtually every key issue, according to recent polling from Reuters/Ipsos. About 48 percent disapprove of his performance regarding the 'rule of law,' 49 percent disapprove of his performance on the environment, 51 percent disapprove of his handling of the economy, 52 percent disapprove of his performance on international trade, and a whopping 57 percent disapprove of his performance on the cost of living. Trump has overhauled the government, upturned the economy, and completely eroded any sense of security or power that the United States offered as a global trading partner. His wantonly placed tariffs will keep the cost of living high (so much for those grocery prices he campaigned on) while doing nothing to reduce inflation. While it's unusual for performance ratings to be this paltry this soon in a presidential term, the speed at which Trump has undertaken his chaotic policies certainly explains the numbers. And it's far from over. 'There's a big risk for Trump that it's only going to get worse from here,' said the libertarian CATO Institute's Scott Lincicome.
New York Times
11-04-2025
- Business
- New York Times
The ‘China Shock' Offers a Lesson. It Isn't the One Trump Has Learned.
When Congress voted to normalize trade relations with China at the beginning of this century, U.S. manufacturers braced for a stream of cheap goods to begin flowing into U.S. ports. Instead, they got a flood. Imports from China nearly tripled from 1999 to 2005, and American factories, with their higher wages and stricter safety standards, couldn't compete. The 'China shock,' as it has come to be known, wiped out millions of jobs in the years that followed, leaving lasting scars on communities from Michigan to Mississippi. To President Trump and his supporters, those job losses are an object lesson in the damage caused by decades of U.S. trade policy — damage he promises that his tariffs will now help to reverse. On Wednesday, he further raised duties on imports from China, well beyond 100 percent, even as he suspended steep tariffs he had imposed on other trading partners. Few economists endorse the idea that the United States should try to bring back manufacturing jobs en masse. Even fewer believe that tariffs would be an effective tool for doing so. But economists who have studied the issue also argue that Mr. Trump misunderstands the nature of the China shock. The real lesson of the episode wasn't about trade at all, they say — it was about the toll that rapid economic changes can take on workers and communities — and by failing to understand that, Mr. Trump risks repeating the mistakes he claims he has vowed to correct. 'For the last 20 years we've been hearing about the China shock and how brutal it was and how people can't adjust,' said Scott Lincicome, a trade economist at the Cato Institute, a libertarian research organization. 'And finally, after most places have moved on, now we're shocking them again.' Want all of The Times? Subscribe.
